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Gap Ad Budget Spikes

NEW YORK — Gap Inc. is boosting its fourth quarter ad budget by approximately 30 percent over year-ago levels, to an estimated $151 million, and appears bent on bridging a divide commonly faced by fashion consumers: the disconnect between a...

NEW YORK — Gap Inc. is boosting its fourth quarter ad budget by approximately 30 percent over year-ago levels, to an estimated $151 million, and appears bent on bridging a divide commonly faced by fashion consumers: the disconnect between a brand’s advertising, merchandise and selling environment.

That’s the word from Richard Jaffe, a specialty retail analyst who follows Gap for UBS Warburg’s Global Equity Research unit. A Gap spokeswoman declined to confirm those figures, citing company policy. She did say, “We backed up a lot of our ad spending for the fourth quarter, so that’s the right way to think about it.”

Gap Inc.’s full-year ad spending is expected to reach $513 million, or 21 percent more than the $423 million it spent in 2001, based on company data and UBS estimates. Gap’s fourth quarter ad budget of $151 million represents 29 percent of its estimated ad spending this year and compares with the $116 million, or 27 percent share, it spent a year earlier. Gap’s ad expenditures both this year and last peaked in the third quarter, at $167 million and $128 million, respectively. In the first quarter of 2002, by contrast, Gap’s spending on ads contracted 28 percent to $78 million, or 15 percent of the ad budget, from $109 million, or 26 percent, in the prior-year period.

Gap’s strong increase in fourth-quarter ad spending, combined with merchandising more tightly linked with its marketing effort, is likely to accelerate Gap’s improving performance, Jaffe projected. The analyst noted an increase of 30 percent in Gap’s third quarter ad budget was instrumental in driving sales during the period at the company’s Gap and Banana Republic stores. Comparable-store sales at Gap stores were off 2 percent for the quarter ended Nov. 2, versus a year ago, but climbed 11 percent in October and 6 percent in November. Comps at BR rose 1 percent in the third quarter and added 3 percent last month.

In addition, the tone of the company’s holiday campaign, along with the consumer marketing background of Gap’s recently arrived chief executive officer, Paul Pressler, has Jaffe, for one, anticipating that more aggressive and fully integrated marketing efforts will be developed by Gap. “I expect Pressler is going to more tightly link the ads, store experience, and product,” Jaffe said of a strategy that appears straightforward, but is seldom optimized by fashion brands.

For example, Gap’s holiday TV spots for its flagship chain, which began airing Nov. 21, are consistent with the chain’s emphasis on brightly colored sweaters and striped scarfs. Models wearing those items in the commercials dance and swirl to a spirited version of the 1973 O’Jays hit “Love Train,” imparting a sense of holiday cheer. Another instance of weaving together ads, product and shopping environment emerged Tuesday on the streets of New York, in an Old Navy taxi cab campaign. Ad toppers on 400 of the city’s yellow cabs proclaim “Fleece out…climb in!” and the taxi’s seats are adorned with bright red fleece fabric. The cab campaign, slated to run through Dec. 17, complements Old Navy’s “Family Fleece” TV spots, which bowed on Nov. 14, and two circulars, featuring fleece and colorful sweaters, scheduled to be distributed this month.

In a research report published Tuesday, Jaffe applauded the hire of Leo Burnett USA as a strategic branding partner for the Gap and Banana Republic Brands, as reported, in part, because it will enable Pressler to leverage the experience he had working with Burnett, while he was at the Walt Disney Co.

“Pressler knows them [Burnett] well,” Jaffe said. The Burnett deal also marks the first time Gap has enlisted an agency of that size in its marketing effort.